JP Morgan's investment banking profit slumped 57% to $858 million as the unit was hit by a $1.5 billion loss from a funding valuation adjustment for over-the-counter derivatives and structured notes. Excluding accounting adjustments, the profit was down 11%.

JP Morgan reported a profit of $5.28 billion, or $1.30 a share, versus a profit of $5.69 billion, or $1.39 a share, a year earlier. The latest figures included 27 cents a share in legal costs, among other one-time items. Excluding items, per-share earnings were $1.40. Revenue dropped 1.1% to $24.11 billion. Analysts polled by Thomson Reuters had expected a per-share profit of $1.35 on revenue of $23.67 billion.

JP Morgan kicks off the latest reporting season for US banks, delivering investors the first look at a quarter expected to be stymied by continued weak revenue from mortgage refinancing and fixed-income capital markets, but in which profits are expected to be buoyed at many banks by expense cutting and strong stock underwriting results.

JP Morgan continues to attract more regulatory and legal scrutiny than many of its peers. In the past year the bank agreed to roughly $20 billion in payouts resolving probes of everything from alleged misrepresentations made during past mortgage bond sales to the 2012 "London whale" trading debacle.

Last week, JP Morgan announced an additional $2.6 billion in payments to settle allegations it failed to properly monitor one-time client Bernard Madoff. That forced the bank to bump up its legal reserves and reduce fourth quarter earnings by $850 million.

For James Dimon, JP Morgan's chairman and chief executive, recent quarters have brought increasing focus to the question of how he and the bank's board can win back regulators. Dimon has previously warned that legal costs could remain volatile for several quarters. For the quarter, JP Morgan's litigation expense was $800 million, versus the $1.2 billion reported a year earlier and $9.15 billion reported in the third quarter.

Still, investors appear to view legal settlements positively as they resolve looming problems. JP Morgan stock through Monday had rallied about the same as the KBW bank-stock index over the past three months, a period that included the announcement of JP Morgan's $13 billion settlement with the Department of Justice over mortgage issues.

"We are pleased to have made progress on our control, regulatory and litigation agendas and to have put some significant issues behind us this quarter," Dimon said in prepared remarks.

During a fourth quarter impacted by the usual holiday slowdown, banks also saw their trading and sales desks suffer from US budgetary concerns and the timing of the Federal Reserve's decision to begin scaling back economic stimulus.

Revenue from fixed income markets—one of JP Morgan's traditional strengths—was $3.2 billion, down from $4.08 billion a year earlier and $3.44 billion in the third quarter.

Meanwhile, equity markets revenue—which includes stock and stock options trading—fell to $873 million compared with $1.3 billion a year earlier and $1.25 billion in the prior quarter.

JP Morgan also again showed weakness in its mortgage business as the bank, like its peers, continues to feel the impact of higher interest rates.

Mortgage loan originations of $23.3 billion fell 54% from the prior year and 42% from the third quarter. JP Morgan had previously said it expects to lose money on its mortgage-origination business in the second half of the year.

But overall mortgage banking profit was $562 million, up 34% from the prior year even as revenue slumped, as the unit reported low non-interest expense and credit loss provisions.

The bank also highlighted several positive signals from consumers and businesses. Period-end loan balances in the commercial banking unit were $137.1 billion, up about 7% from a year earlier and 1% from the prior quarter.

Like most banks, JP Morgan has been reining in costs as a way of making up for sluggish revenue growth. For the latest period the company said its non-interest expense fell about 3% from a year earlier and 34% from the prior quarter to $15.55 billion.

The bank has also been cutting staff after last year outlining plans to eliminate 17,000 jobs by the end of 2014—which would give it the smallest headcount among its peers—and reduce expenses by at least $1 billion annually. Headcount dropped by 7,557 from the fourth quarter a year earlier to 251,196.